"Uncertainty from trade frictions is likely to cause a setback for business investment after a relatively strong performance in 2024. Although the UK has avoided major tariffs so far, businesses will likely remain cautious until clarity emerges on trade policy. This could potentially see investment plans shelved and weaken trade activity this year.
The upcoming Spring Statement is unlikely to deliver additional fiscal stimulus for the UK economy. The sluggish growth outlook, alongside competing spending pressures will force the Chancellor to tighten purse strings. With further borrowing and tax increases ruled out, the government will need to reprioritise spending. The recent cut to Overseas Development Assistance to fund an increase in the defence budget is a preview that some departments will see their spending plans squeezed.
Despite a slowdown in January, growth momentum is set to gather at a modest pace over the coming months. We expect a pick-up in consumer spending in the first half of the year, underpinned by robust wage growth and a healthy savings buffer. Additionally, the front-loaded spending measures announced in the Autumn Budget are set to come into effect in the first half of this year."
